Trade partnerships have plusses
July 22, 2014
As has been the case since global trade negotiations began following World War II, grain-based foods mostly has avoided an active role either in pressing for or against agreements that typically are marked by much political and economic controversy. That neutral attitude, always with a watch for provisions that might directly affect how the industry does, continues to the present. Three trade agreements are currently being negotiated, each of which could impact grain-based foods in a few direct and mostly indirect ways and which at the least deserve careful study as to their potential for doing good or harm. That becomes increasingly difficult for an industry where international trade plays a smaller and smaller role, except, and this is hugely important, how it influences the well-being of consumers and the price of major ingredients.
It is the consumer issue that mainly stirs opposition to the three current agreements. Opponents contend that international trade pacts have not benefited American labor or middle class. Indeed, they point to what has happened to employment, wages and income in the 20 years since the North American Free Trade Agreement went into effect as evidence that such negotiations hurt working people. NAFTA has the attention of grain-based foods for how it opened trade in wheat between the United States and Canada and Mexico. This opening at one extreme makes those two countries the dominant export markets for U.S. flour. At the other extreme, the grain movement is mainly into the U.S., from Canada, and into Mexico, from the U.S. It seems fair to judge NAFTA a success for grain-based foods by removing barriers that stood in the way of unfettered business.
The three agreements currently under negotiation have potentially less direct influence on grain-based foods than NAFTA. One that has the least chance for being adopted is a new pact for the World Trade Organization called the Doha Agreement. Its chances are diminished largely by reluctance of India to liberalize agricultural trade. The two others, conceived largely by the Obama administration, are the Trans Pacific Partnership (T.P.P.) and the Transatlantic Trade and Investment Partnership (T.T.I.P.).
The countries in Asia and Europe to be included in these agreements account for nearly 70% of global gross domestic product. This is the case even with countries like China and India, the two most populous nations, omitted. The expectation is that launching such a partnership would prompt these nations to address trade practices that keep them excluded. Major American business groups that favor this sort of trade negotiation have stepped up to support the two initiatives, pointing to their potential for greatly improving the overall business climate. Unlike previous trade pacts that mainly sought to reduce specific tariff barriers, the new pacts include requirements affecting the environment, labor relations and health and welfare issues. These elements do not stand in the way of active business support.
President Obama is criticized by business groups for a lack of enthusiasm in pressing Congress to approve at least the two partnerships. This reticence is due in part to the opposition the president has experienced from his own party, most notably by Senator Harry Reid, the Senate majority leader, who surprised many by opposing the “fast track” authority essential to negotiating trade agreements. He timed his opposition to a critical time in talks with Pacific Rim and European nations, giving priority to his concerns about maintaining the Democratic majority in the Senate.
Even though the two partnerships are limited to specific countries and areas, the issue of whether globalization is good or bad for America is front and center. As the world’s largest trading nation, which is a longtime plus for grain-based foods and for much of industry, the U.S. not just benefits from globalization but thrives on its account. Pressing the president to do everything possible to secure “fast track” negotiating authority and acceptance of the partnerships is important in many ways for grain-based foods.